Dealing with Debt Collectors

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1) How does someone know that a collection call is legitimate – that they’re not being scammed?

It’s tempting to think that we never forget anything…that we’re always on top of our game, 24/7. The reality is that with so many payment options, credit cards, and online accounts available today, things sometimes do fall through the cracks.

If you get a collection call, resist the urge to hang up (or to delete the voicemail). Call them back if necessary, and find out the specifics of what they claim you owe. By law, any debt collector must send you a written “validation notice”, telling you how much money you owe, and to whom…and they must do it within five days of contacting you. If that letter never shows up, there’s a good chance the call was just an attempted scam.

When talking to a debt collector, do not volunteer any personal or financial information. If they ask for your Social Security number, bank details, or anything else, that’s a huge red flag. Instead: wait for the details to arrive in writing before taking any other steps.

2) Can you simply tell a debt collector “stop calling me”?

Yes. For starters, a debt collector may not legally contact you before 8am or after 9pm, period. Also, they must not contact you at your place of employment if they’ve been told (either verbally or in writing) not to do so.

Beyond that, it’s simply a matter of telling the collector (or their agency), in writing, not to contact you again. Once you’ve done so, the only two reasons they can call are to tell you that they won’t call again, or to tell you that they intend to take some further action (such as a lawsuit.)

Remember: sending a “do not call me” letter doesn’t get rid of a debt, but it should stop the contact.

3) What if the debt collector is mistaken, and the person really doesn’t owe the money? Or they’re being mistaken for someone else?

This does happen…and it happens a lot. Companies often outsource their debt collection, and the collection agency has no motive to doublecheck the information…they’re just dialing for dollars. Similar names, identity theft…any number of things can lead to an incorrect collection attempt.

If you’re contacted about a debt that truly isn’t yours (and again, always ask to see the proof), you have 30 days to tell the collection agency, in writing, that the debt is not yours. To be on the safe side, send this letter by certified mail, and pay for a “return receipt”, so there’s proof that they got your letter.

Once they receive your letter stating “I do not owe this money”, the collection agency is (in most cases) legally prohibited from contacting you again. At that point, it’s on them (or the company they’re representing) to come up with the proof that you actually owe what they say you owe.

If you think you’re the victim of identity theft, the next step is telling this to your credit-card companies and to the credit reporting agencies, so it doesn’t become an ongoing problem.

4) Is it possible to negotiate with a collection agent…to haggle them down?

Everything is negotiable. That said, your first choice should always be to pay what you owe. It’s not only the right thing to do, but it’s better for your future financial health. Getting sent to collections is bad for your credit….and settling a debt (by paying less than you owe) will knock your credit score down even further, and might make it hard to get decent credit rates in the future.

If you simply cannot pay what you owe, and you want to cut a deal, you can offer the collection agency a lump sum…say, 40 or 50 percent of the total amount. When your account goes to collections, that typically means that the company has written off the debt and “sold” it to the collection agency for pennies on the dollar…so anything you offer the agency is pure profit. This means they’ll often accept a flat payment of 50% or less.

(Another reason not to do this, however: any “forgiven” debt of $600 or more must be reported as income for tax purposes.)

5) What if a debt collector is threatening or harassing someone? Do consumers have any protection from that?

It’s easy to feel intimidated by debt collectors, but it’s crucial to remember that they’re just people – it’s just some guy sitting in a bad office chair, drinking terrible coffee, making phone calls all day. If a bill collector becomes abusive, uses profane language, threatens to air your dirty financial laundry, or tries to come off like a financial “cop”, don’t hesitate to make a report. Contact your state Attorney General’s office (at NAAG.org) or the Federal Trade Commission (at FTC.gov).

When in doubt, ask to see everything in writing, and keep notes or records of your conversations. You want to have as much evidence as possible about any sort of misbehavior by a collection agent.